Search form

Search

News

Longboat Key
Friday, May. 29, 2009
6 years ago

Bank forecloses on Colony

Share

by:
Kurt Schultheis
Managing Editor

Bank of America has filed a foreclosure suit against Colony Beach & Tennis Resort Chairman and owner Dr.
Murray “Murf” Klauber and seven of his resort corporations, alleging they have defaulted on three loans whose outstanding amounts total $8.02 million.

In a civil complaint filed April 23 in the 12th Judicial Circuit Court in Sarasota County, Bank of America alleges that Klauber and his corporations have been in default of loan covenants and payments since October 2007.

Katie Klauber Moulton, president and general manager of the Colony, said the foreclosure suit is a direct result of the Colony’s legal dispute with the board of directors of the Colony Beach & Tennis Club Association Inc., the homeowners association for 234 residential unit owners at the Colony.

The two sides are arguing in federal bankruptcy court over whether the association must pay up to $14 million in overdue maintenance costs to the Colony, funds Klauber says have been due since at least 2006.

Moulton said the foreclosure suit is having no effect nor will it affect the operations of the Colony. “It does not change the way we do business here,” she said. “We’re still doing everything as we always have.

There’s not going to be a chain across the property.”

Moulton said the Colony’s annual Fourth of July fireworks celebration and cookout will be held as always.

Nonetheless, she acknowledged that the dispute with the unit owners’ association has inhibited the Colony’s ability to stay current on the loans.

“For three years, because of their refusal to accept accept their obligations, the revenue and occupancy at the resort have declined,” Moulton said. “And that has caused the amount of we make and are able to pay to decline.”

Moulton said Bank of America “has been working very closely with us,” noting the bank has been aware of the dispute between the Colony and its association since it began in late 2006. She said the Colony informed the association board and the bank in late 2006 that without the association’s funding of its maintenance fees, the Colony would encounter “significant cash issues.”

The suit says the bank notified Klauber twice at the end of 2007, on April 23, 2008, and on Dec. 18, 2008, that Klauber and the corporations were in default. In the December letter, the bank said the balances due “were being accelerated.”

But Moulton told The Longboat Observer that Bank of America has provided an extension on the foreclosure that would postpone further action until after federal bankruptcy Judge K. Rodney May in Tampa rules on the suit between the Colony and its association.

The trial before Judge May is expected to reach its final stage this week, with Moulton scheduled to testify.
She said Judge May has given the two sides’ attorneys until June 2 to complete the trial.

According to the foreclosure complaint, Bank of America says Klauber and his companies are past due on three loans whose principal outstanding amounts total $6,434,464.50. An additional $1,593,837.60 is due in interest, which is being assessed at 18% and at a rate of $3,271.23 a day.

Court documents show the loans date back to March 1995, when Klauber and four of his companies borrowed $4.2 million from Republic Bank in St. Petersburg. In the 14 years since, the loans have been revised and assigned to Bank of America.

Moulton said the three loans in question stem primarily from 2000 when the Colony underwent extensive renovations on the outside of its separate condo unit buildings. Court records show the loans and lines of credit were modified again in 2005, with the consolidated, total loan amount of $6.8 million.

Pledged as collateral for the loans were all of the Colony’s recreational property, including the tennis courts, walking trails and swimming pool; The Colony Dining Room restaurant; The Monkey Room bar; tennis shop Le Tennique; a locker-room unit; meeting-room unit; two hotel penthouse units that make up Klauber’s office and living quarters; two other condo units; the beachfront, three-bedroom Vagabond unit; all property, furniture, machinery and equipment acquired for use in the resort; all leases, rents and profits from recreational facilities; all rental, sale and reservation agreements; and “all income and profit of every kind from the mortgaged property.”

Named as defendants in the foreclosure suit were Colony Beach Inc., Colony Beach & Tennis Club Ltd., Resorts Management Inc., Colony Beach and and Tennis Club Inc., Colony Special Services Inc. and Le Tennique Inc., all Florida corporations; Colony Investors Inc., a Michigan corporation; and Klauber.

The Colony/association
bankruptcy court update
court update

The Colony Beach & Tennis Resort and its association started the second week of a Tampa federal bankruptcy court trial Tuesday, May 26, that will decide whether the association is required to pay $14.1 million in repairs.

The Colony says the money is needed to fix up buildings and repair damage from the 2004 hurricane season.

While giving her testimony, Colony President and General Manager Katie Moulton said “the unit owners made a bad mistake” by twice voting down a renovation proposal that called for renovations to the buildings, among other improvements.

Moulton said she indicated to the association’s board of directors that the last budget for which she had any input in 2006, for the resort’s fiscal-year budget that began May 1, 2007, “indicated that the hotel could not continue to pay for all of the association expenses.”

“I implored the board to reconsider the project, because the present conditions are dire and create liability concerns,” Moulton said.

Neither Moulton nor Colony Beach & Tennis Resort Chairman and owner Dr. Murray “Murf” Klauber have reviewed a budget since April 2007, according to Moulton, which led to a Sarasota County civil lawsuit that was sent to bankruptcy court last year.

The association, Moulton said, has also failed to pay thousands of dollars in invoices related to the upkeep of the facility and a $2.2 million assessment needed to float operating costs through the slower summer months and fund more immediate repairs to the buildings.

“The hotel can’t meet its own expenses,” Moulton said. “And the partnership has continued to do maintenance it cannot afford to do.”
Why?

Moulton explained on the stand that after more than 50 years of business, The Colony “has stature in this world.”

“If we cease operating, we will affect our brand permanently,” Moulton said. “The longer we remain open, the better off it is for the unit owners as well.”

While redirecting Moulton, association attorney David Banker insinuated the Colony saw no significant hurricane damage in 2004 and 2005.

Moulton, however, claimed the Colony had paid a $200,000 insurance claim from a direct result of the storm seasons.

Moulton also explained that the resort’s 232 unit owners only had to pay one minor assessment prior to 2007.

Moulton compared her resort to The Longboat Key Club and Resort, explaining that Inn on the Beach hotel unit owners have paid recent assessments of $150,000 per unit and have paid for recent interior renovations.

“We didn’t even require our unit owners to pay real-estate taxes on their units until 2001,” said Moulton, who explained the average Colony owner paid an average of $126,669 for a unit and has seen increases in property value over the years.

The trial is expected to wrap up by Tuesday, June 2, and Judge K. Rodney May must make a ruling at that time on whether the $14.1 million needs to be paid or not.